If you deposit $5000 into a savings account that receives 6% interest compounded annually, this means that your interest each year is 6% of the amount you originally deposited into your account ($300), and after 5 years, your total interest earned would be $1500. a. Trueb. False

Question

Knox

Mathematics

28 January, 07:54

If you deposit $5000 into a savings account that receives 6% interest compounded annually, this means that your interest each year is 6% of the amount you originally deposited into your account ($300), and after 5 years, your total interest earned would be $1500. a. Trueb. False

+3

Answers (1)

Know the Answer?

Haiden Wood · Answer 1

b. False

Step-by-step explanation:

False.

It is 6% on your total value on the previous year.

For example, you start with $5000.

On the first year, you earn 6% of 500 which is 300.

So at the end of the first year, you have 500+300 = $5300.

On the second year, you earn 6% of what you had at the end of the first year, so 6% of 5300 = 0.06*5300 = 318. So you will have 5300 + 318 = $5618, of which 618 are earned in interest at the end of the second year.

The same for the third, fourth and fifth year.

So the correct answer is:

b. False